Sunday, July 30, 2017

Microsoft is Hustling Us With "White Spaces"

Microsoft recently made a Very Serious Announcement about deploying unused television airwaves to solve the digital divide in America. News outlets ate it up: "To Close Digital Divide, Microsoft to Harness Unused Television Channels," said The New York Times on July 10, in a headline that could have been written by the PR folks in Redmond. The Washington Post pegged both a really big number and a year on the plan: "Microsoft wants to bring 2 million rural Americans online by 2022," wrote Hamza Shaban and Brian Fung on July 11. I think there’s another story these two newspapers missed.

Microsoft's plans aren't really about consumer internet access, don't actually focus on rural areas, and aren't targeted at the US—except for political purposes. Other than that, the papers got it right.

I am a big fan of Brad Smith, Microsoft's president and chief legal officer. He is a thoughtful, long-term thinker and planner, and you can see his geopolitical mastermindery at work here.

Here's what's really going on: Microsoft is aiming to be the soup-to-nuts provider of Internet of Things devices, software, and consulting services to zillions of local and national governments around the world. Need to use energy more efficiently, manage your traffic lights, target preventative maintenance, and optimize your public transport—but you're a local government with limited resources and competence? Call Microsoft. Its entire Redmond campus is a smart city. A typical Microsoft story (this one actually written by Microsoft) : “French Cities Cut Drivers’ Costs by 90 Percent With Intelligent Car-Sharing Solution,” all using Microsoft technology “to connect cars, kiosks, charging stations, and a remote data center.”

Now let’s get behind those laudatory headlines in the Times and Post. Microsoft doesn't want to have to rely on existing mobile data carriers to execute those plans. Why? Because the carriers will want a pound of flesh—a percentage—in exchange for shipping data generated by Microsoft devices from Point A to Point B. These costs can become very substantial over zillions of devices in zillions of cities. The carriers have power because, in many places, they are the only ones allowed to use airwave frequencies—spectrum—under licenses from local governments for which they have paid hundreds of millions of dollars. To eliminate that bottleneck, it will be good to have unlicensed spectrum available everywhere, and cheap chipsets and devices available that can opportunistically take advantage of that spectrum.

In the US, we already have some unlicensed spectrum, and you're probably using it right now: Wi-Fi. But it's mostly at very high frequencies, which means (particularly at the low power limits your devices are required to use when transmitting and receiving over Wi-Fi) that it doesn't go very far without fading out. This is why you have to be sitting inside a Starbucks or a McDonald's to work on your laptop: The waves don't penetrate the walls easily or travel more than about 100 feet. Traditional Wi-Fi has only limited usefulness to save Microsoft and everyone else from having to deal with the traditional wireless carriers like AT&T and Verizon. Only the carriers with licenses are allowed to transmit and receive at high power levels using lower-frequency spectrum.

For decades, the FCC has been painstakingly working at clawing away some lower-frequency spectrum from existing television broadcasters to make it available for data transmissions generally. There's a really, really long story here with which I won't burden you. The recent update is that the Commission has finally gotten the broadcasters to make available some of their low-frequency spectrum for auction, and "repack" their operations into the narrower swaths of frequencies that their normal digital transmissions require. If you want to learn more, be my guest—I'll see you in a week or so.

Along the way, people noticed that the frequencies between the television channels that remained were going to be unused. That seemed like a waste. So the idea became to use those spaces—called guard bands—for unlicensed transmissions. The enormous success of Wi-Fi— and the billions of devices and radios that were manufactured to take advantage of Wi-Fi—was the precedent everyone cited. Let's do it again, was the idea—except this time, let's permit anyone to use this unlicensed spectrum between the TV bands at higher power levels so transmissions can go farther. That's the “white spaces” idea: spaces between TV channels for anyone to use. (...)

Microsoft won’t get what it wants if it only gets other countries to give it permission to use white spaces. It is very important to Microsoft that chipsets and other elements of devices capable of transmitting and receiving across various frequencies of unlicensed spectrum be available to it at the lowest possible prices. Low prices happen only when manufacturers operate at very large scales—when there's a very large market to serve. In the white spaces arena, scale will happen only if the US white spaces plans go forward. The whole FCC process has taken so long and been so political that there's a tremendous amount of uncertainty in the market—should manufacturers go ahead and make a ton of chipsets? It's not clear.

And this is the genius of the Microsoft announcement: It is framing its pitch to hit notes the FCC wants to hear, while simultaneously accomplishing its other business goals. What issue does the Chairman of the FCC, Ajit Pai, seem genuinely committed to addressing? The rural digital divide. What does the Trump administration seem to want to push forward when it's not distracted? Infrastructure. As I've often said, existing carriers like AT&T and CenturyLink also like these messages—those carriers are the ones who will likely get any federal subsidies to build (insufficient) networks in rural areas.

So Microsoft's message machine rolls into Very Serious action. By saying that its white spaces plan is aimed at making sure that this unlicensed spectrum is used effectively in rural America, the company can (1) ally itself with the FCC's message, showing that it's willing to play ball and be helpful; (2) lower the risk of our Tweeter in Chief somehow getting Microsoft on his radar in a way that makes life very difficult for the company (lots of corporations are trying to figure out how to get on his good side); and (3) ensure that the FCC's existing white spaces plans don't get tampered with politically. This will (4) allow the manufacturers' chipset production engines to rev up at great, US-wide scale, which will in turn (5) allow Microsoft's business plans in other countries to rely on far cheaper inputs.

It’s like one of those impossible multiple bank shots you see at pool hall exhibitions.

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